The Proliferation of Digital (VOD/SVOD/etc.) and the Further Fracturing of Markets

post on June 5th, 2014
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As Viewed Through Netflix In Brazil

It has been true over the last forty years that as a new movie-viewing platform arrives, chances for consumers to hone their tastes, and to fine-tune their choices has expanded film viewing and expanded film income. At the same time, consumers have become less at the mercy of television networks and theater owners as to what is available, they have consumed mainstream content through the big delivery systems, and lots of different content as well through these more dispersed systems. Digital delivery mechanisms are making that choosiness and fine-tuning of consumption only more so.

In preparing a new section in our State of the Film Markets Report, focusing on the roll-out of these services in spots around the globe, one focus, NetFlix in Brazil, highlighted very plainly how there are many issues in this deployment, and how it will likely not be a hegemonic world, with only a few suppliers in control of all digital content.

Announced at the beginning of the fall, Netflix is expanding into 43 countries throughout Latin America and the Caribbean. The service launched in Brazil in early September. Netflix’s struggles in its first Latin American market cast light on the challenges Netflix will face as it attempts to export its model. Widespread piracy in Brazil, one of the most vibrant piracy markets in the world, and low NetFlix brand recognition are obvious challenges that come to mind. But, in Brazil, Netflix faces stiff competition from local competitors, including NetMovies, Terra TV Video Store, Saraiva Digital, and Muu. Paid TV services, as in the US, are also offering on-demand packages.

Content Deals Are Territory By Territory
Within a month of Netflix’s Brazilian debut, Netmovies announced a streaming deal with Disney. BTIG Research analyst Richard Greenfield notes that the Netflix streaming service seems to have “some, if not all of the titles NetMovies will be offering from Disney. It remains unclear how well-financed NetMovies is and thus what its ability will be to add more content.” Nevertheless, Netmovies’ ability to negotiate an agreement with Disney hints that Netflix may not be able to offer consistent or exclusive streaming content between countries. In other words, no content deals are worldwide, and may not be “region-wide.”

Inconsistent Broadband Penetration Levels
Low penetration of broadband and slower connection speeds in Brazil are an additional obstacle: local newspapers report that Netflix stalls even on broadband connections. According to a May report from Ibope Nielsen Online, only 20% of Brazil’s 42 million Internet users have a connection speed above 500kbs – streaming requires a minimum of about 800kbs.

Local Content Tastes A Barrier
Meanwhile, excitement about Netflix’s initial entry into Brazil has dimmed in the light of consumer gripes. The Netflix catalogue has been a major source of dissatisfaction – according to Netflix VP of Global Corporate Communications Jonathan Friedland, Netflix is working to expand its catalogue. Since its launch, the service has increased its offerings by 50%, and should double by the end of the year.
Securing local content has also been a challenge for Netflix: a month after the service launched, Brazilian newspaper Folha reported that only 7 out of the 10,000 titles available on the service were Brazilian films as NetFlix faced resistance from local producers and TV channels. Recent communications from NetFlix have emphasized acquisitions of local content, such as “The Art of Insult” starring Brazilian comedian Rafinha Bastos.

Technical Glitches Can Mar A Debut
Audio quality also received criticism, especially among users who prefer subtitles to dubbing. According to Gizmodo Brasil, the original audio version isn’t always available. According to Friedland, Netflix is also working on licensing subtitled content; its TV programs for kids, for instance, will include original audio tracks by the end of January, he said. Netflix has held focus groups to provide the company with representative samples, and states that the majority of its customers prefer dubbing. Could licensing subtitled content be a challenge for Netflix in other markets? Despite Netflix’s insistence that most viewers prefer dubbing, the ability to manipulate subtitles was a major source of discussion in Brazilian newspaper Folha’s comparison of Netflix and other VOD services available in Brazil.

Proliferation Of Platforms And Lots Of Extra Work
Netflix’s Android app is now available in Latin America and the company is working on offering its service on iPad, iPhone, iPod and XBox 360 in the region. According to Gizmodo, Netflix’s iOS app has already been submitted to Apple and is now awaiting approval.

Besides mobile devices, Netflix is also looking at connected TVs and recently closed a deal to offer its service on LG Smart TVs in Brazil. Brazilian coverage indicates that short-form content is most popular with connected TV users [FilmProfit’s emphasis]. Sony and Samsung are also key players in the SmarTV market – it remains to be seen how Netflix will fare in the connected TV sector.

Other Operators With Local Content Tastes In Their DNA
NetMovies, for one, provides a significant challenge to Netflix’s streaming-only model. Launched in 2004 as a by-mail DVD and Blu-ray subscription service, Netmovies’ catalog includes some 35,000 titles, including an unknown number of available streaming titles (including its recent high-profile Disney title additions). Anticipating Netflix’s launch, the service expanded its disc availability to all 20 Brazilian states, nearly doubling the territories it served in 2010. Netmovies’ streaming-only service is available for R$9.99, compared with R$14.99 for Netflix. Netmovies offers customers access to its streaming service and its home delivery options for the same R$14.99 cost.

VOD Has Been A Movement Among Cable And Other Operators
As a matter of fact, broadband delivery is not a new concept only to NetFlix, though they have “relatively” solved it here in the States, and moved to Canada. But in a place where news on this used to be a few stories from around the globe in a day, there are now stories in the hundreds per week, with new deployment systems, Sony starting a virtual cable play over the Internet, and so on. Local cable operators can almost buy off the shelf systems and even content packages to deliver to their customers, to stopgap plays like NetFlix and the like.

Some Thoughts, Just About The Netflixes And Amazons:
As an analyst and business planner, I see many clues in Netflix’s Brazil launch that lay out a roadmap for planning the deployment of digital movie and TV content delivery by a NetFlix, or an Amazon, a really fast-moving NetFlix competitor.

• What are content tastes?
• Is the old “last mile” or “last ten feet” of broadband delivery question answered?
• What is alternative device penetration, and network-handling?
• How do we deploy efficiently to a multitude of platforms?
• How do we compete with local systems already in place?

But those questions also point to complexities distributors face as they try to discern where to efficiently peddle a producer’s film(s) to best economic effect, as they go market to market.

The Complex Complexity Of The Complexness Of It All
And then we have, in my case, the daunting task of trying to discern the value for an individual film in Projections Models what the nature of the value is. I had read a blogpost here some months ago, pegging it at some 10 to 15%. I was nowhere near that in my analysis, in fact, closer to half that or less. But we are entering a world where that could become a reality in two years or more. But, these are not omnibus deals. A distributor, particularly for indie product, needs to have in place a series of deals, NetFlix, cable VOD operators, iTunes, Vudu, hotel delivery operators, and so on, and the differentiated deals with each. Of course, you can blend these (and I have to) but this opens the door to seeing the complexity of the equation. We will not have dust settling on this for some time still, but the future is clear to be highly digital.
Some Of Our Sources For This Post:
Netflix não consegue adquirir filmes nacionais – Folha

Filmes do Netflix em HD engasgam na banda larga brasileira – Folha

Netflix Unveils Latin America Service in Brazil – Huffington Post

Um Insulto que os Brasileiros Vão Adora

Aplicativos de VOD são os mais procurados para TVs conectadas – Rapid TV news

And Now I Have Disney Too Netflix Told By Brazilian Rival – Rapid TV News

Disney Signs Streaming Deal With Netflix Competitor – Home Media Magazine

Netflix Executive Addresses Complaints And Promises Quick Fixes –

Onward and Upward!


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Sold the Movie – London Indian Film Festival

post on June 4th, 2014
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Sold the Movie will be making its European premiere at the London Indian Film Festival.

Sold is a narrative, feature film adaptation of the globally acclaimed novel by Patricia McCormick.
Based on true stories, SOLD, is the story of Lakshmi who journeys from a pastoral, rural village in Nepal to a gritty brothel/prison called Happiness House in Kolkata, India.

Through one extraordinary girl’s story, SOLD illustrates the brutality of child trafficking, which affects millions of children around the globe every year. Globally the average age of a trafficked girl is thirteen, the same age as the girl in the film. SOLD is a call to action, and a testament to the power and resilience of the human spirit.

For more information about the London Indian Film Festival: London Indian Film Festival
For the official movie site: SOLD the Movie

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SIFF: The Breach

post on June 4th, 2014
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The Breach – The film centers on the fragile ecosystem of wild salmon, including a chronicle of Washington’s Elwha River dam removal as well as a comprehensive look at Alaska’s Pebble Mine mineral exploration project, which could arguably destroy one of the world’s last unspoiled salmon runs. This film is a work in progress.

Currently showing at Seattle International Film Festival: Wednesday June 4th at 6:30 pm (Uptown Theatre) and Saturday June 7th at 1pm (Pacific Place).

For more information:
The Breach – Official Site
SIFF – The Breach (tickets available here)

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SOLD the Feature Film

post on March 4th, 2014
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News from one of our clients:

Our feature film “SOLD,” at the CineQuest Film Festival in San Jose on Friday, March 7 at 7 pm, and Sunday March 9 at 6:45 pm.

To purchase tickets for CineQuest:

Executive produced by Academy Award winner Emma Thompson, produced by Jane Charles and directed by Academy Award winner Jeffrey D. Brown. The story puts the audience in the shoes of an amazing 13 year old girl, Lakshmi, who is trafficked from Nepal to a brothel in Kolkata. Through one girl’s story, we give voice to millions of girls who are trafficked every year.

SOLD is an adaptation of the National Book Award nominated novel SOLD by Patricia McCormick, which has been translated into 32 languages. The film stars Gillian Anderson and David Arquette and an incredible Indian cast. Join us to see this powerful film and to shed a light on human trafficking.

Please like our Facebook page so we can keep you informed as “SOLD” comes to a theater near you:

Facebook: SOLD the Movie
SOLD the Movie

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Comparable Pictures: How to Choose ‘Em and Use ‘Em

post on October 17th, 2012
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This year alone I have helped producers choose and use hundreds and hundreds of titles for comparison to the films they seek to finance and make. When I am preparing projections and financials packages, whether for a single film or a slate of films, the first crucial task for me is to understand the film(s), to be able to see them both as the producer does and how the world might perceive them, so that we can look at comparable titles from several points of view, including the eyes of finance partners, distribution partners, and so on…

Every producer might think about this a little differently, but I am hoping it could help some of you if I talked about my own points of view when approaching this task. Whether I am involved in your process or not, I hope this helps in the way you approach it.

First, the comparable films chosen should be seen as “models” for your film. They can be creative models, but they are also business models and audience models, and we are seeking insight from the information those models bring to us. In my case, mostly business and consumer insight for strategies and value.

So, what are some key questions I think you should be asking and answering to discern comparable titles.

  1. I like to start with films of Similar Themes.
    1. Many producers think they need to use films with similar stories. This is often, in my book, a real stumbling block. A film uses its plot elements to explore themes, rather than thematic elements to explore the plot. So, focus on the theme. If your film is a kidnap, then choosing only kidnapping films, for example, could actually miss the mark of your film, and make your choices far narrower than they really might be, than if the positioning of your film was as a drama of how an individual can get caught up in events that snowball unintentionally into great tragedy.
  2. Of course we want to start in the Budget Range of your film. There is a little bit more I will have to say about this later. But the lower the budget of your film, in some ways, the narrower the range of budgets we might have to work in. So, a $5 million film, we might look at titles from $3 or $4 million, to $10 million. If your film is $100 million, then we can reasonably look at films in the $70 to $200 million range, for example. Of course, with lower budget films, there could be reasons why we might broaden the range of budgets, some of them might include a sharper comparison in target market, for example. Sometimes, we may be dealing with a film that has few thematic, story, target market, and so on films that are in the same budget range of our film. In that case, we may need to choose higher budget films, or some at our target budget, and one or more at a completely different budget level.
  3. If possible, we would like to work with films Released More Recently. Various elements of the release and markets in these changing times may be much more indicative of how your film might perform as we go forward, than a film released ten years ago.
    1. Still, however, your film might be so unique that similar films come along relatively seldom, so that we have to take them from the time periods in which they have appeared. That might lead us to choose films from fifteen or even twenty years ago, if they also fit in other ways.
    2. As well, if we understand the range of the domestic box office, at least that can give us a starting point for understanding the possibilities of our prospective film’s value.
  4. Understanding the Target Market for your film is an important element in helping us determine good comparable films. Just today I was working on a middle ages Action Adventure with a relatively low budget, but when studying the target audience of two higher budget Action Adventures, and analysis of Action Adventure audiences from an exhibitor overseas, and it was remarkable the similarities in audience breakdown. Understanding your film’s target market is crucial in many other ways that will serve you through the whole process, including the range of target distributors and the distribution method.
  5. Style of Release or Distribution Method. The viable selection of distributors, the possible number of screens in release, the size of the target market, all are encompassed in the understanding of the style of release of your film, and its comparables. At certain budget levels, a Producer Controlled Release is viable, even if it is not your preferred method and you go a different way. At others, unless you can mount a studio-style release, you must find and work with a studio partner to achieve the market dispersion your film and budget needs, and your target market(s) can support.
  6. What is the Look and Feel of your film? The style of your film can tell us a lot about where it belongs in the continuum. That continuum encompasses Budget, Target Market, . A comedy that is quirky, or a film that will be cut with a fast pace will likely have a younger-skewing audience, and may be less suitable for an older audience, unless there are thematic elements that are more suitable for older audiences. I suppose, then, what you see from my answer to this question, is that these things are all inter-related.
  7. What is the Target Cast or the negotiated Casting of your film? Of course, given that you can achieve and afford your target cast, what does this say about target market, and, commensurately, what does that say about the style of release.
    Now, sometimes, a producer will think it might be easier for me than for them to make choices of comparable films. In many cases, it can be much harder for me. And, then you might understand why I charge for this service, and why it is better for you to start with your own choices, and then I might be able to help you refine that list.
    Let me tell you some of the reasons why:

    1. You probably know your film better than I do.
    2. You likely know what about your film inspired you, better than I do.
    3. You know your own influences and desires for your film better than I do.
      1. The influences for your film, whether you are the writer, the producer or the director, or some combination of the three of them, are likely the most insightful place to start.

    So, I always like to start by asking you to help me see the film the way you see it. No matter how smart I might be, my goal and job is to help you achieve your film, and comparable films that I deliver are a suit of clothes you will wear, not one I will wear.

The following is a set of questions we ask our clients to think about in choosing comparable titles. This comes from our Project Intake Form for packages where we are doing Comparables, Projections, Business Plans and the like:

FilmProfit(r) Comparable ROIs Report

Comparables – in look and feel, market, budget, cast, distribution strategy, story, or a combination thereof. These should be films you think are the best matches for Comparables, but be assured we look them over fully, and make sure we don’t think others might be better (Our criteria for choosing comps are:

  • Does it share target audience
  • Is it story style comparable, not story comparable (many get hung on this)
  • Is it distribution comparable (studio, methods, etc.)
  • Is it budget comparable
  • Does it evidence broad or deep interest in the subject matter
  • Did it come about the same way (outsider production, or insider production)
  • Is it casting level comparable -Certain other items may include production methods, etc.
  • Does your team feel comfortable with it, can they represent it)

Onward and Upward!

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How Do You Kick-Start Your Business Plan?

post on October 17th, 2012
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What The Heck Is The Thru-Line and Why Is Every Film A Marketing Problem Challenge and Opportunity?

***I am updating this article, particularly after a discussion with a client that tweaked my thinking on using the word “problem.” Every time I used it, I found myself explaining it, and he was right. Thanks to Anre Garrett!

Many new and even highly experienced filmmakers arrive at our door trying to think about all parts of a business plan at once, worried about the research (worried about what to research), worried about how to describe the process, planning to deliver a detailed schedule of their production activities, trying to make their own stab at projecting the value of their film, and worrying about all kinds of deal questions, their festival strategy, selling DVDs on the Internet, selling downloads to phones in China, you name it, a stew of boiling ideas and decisions. I sometimes call this state of affairs “all trains arriving on all tracks simultaneously.”

But how do we stop and schedule the trains? One of the biggest contributors to overwhelm in decision-making and clear action is simply trying to make too many decisions simultaneously.

A Good Way To Overcome This – Remember Why You Are Here

Every film has a driving force in its idea. The industry likes to call it the concept. They love to reduce things to a few pithy words that seem to mash two or three ideas together and make a film rank high on a “cool” meter. The fact of the matter is, some films take contemplation, some films encourage involvement. There are many kinds of films that are viable for many kinds of film fans. Some are even for people who are almost never fans of films, or are very wary of films. Some elements of the Christian audience fit this profile.

Remember Why You Are Here, Above All – The Thru-Line

When a film is conceived, there is an audience for it within the story’s conception. Some think it’s dirty to contemplate your consumer, but even if the perfect consumer of your story is someone just like you, maybe even is you, that’s an audience too (no matter how unique and unreachable and above it all you think you are). I once had a Thanksgiving dinner where one of the older guests, an ex-hippie mom who had raised two very nice geek sons who were into all the latest gadgets and technology, even working in technology, and she said she was unreachable, as she didn’t have a TV, and wasn’t susceptible or identifiable to marketing. Well, if she reads Mother Jones, or even her local co-op newspaper, somebody is trying to reach her with messages. I think she hated me for saying all that. She was just the right kind of person to get a What The #$*! Do We Know?! message from the granola, co-op, whole foods type marketers that worked on that film. She probably did get more than one message.

Paula Silver once told me she was hired to help galvanize the audience for My Big Fat Greek Wedding, and her first job was to go a Greek dancing convention in Seattle. As she gave out every shirt she had printed up, she told the dancers that they needed to support this film, or “it would be another 20 years until you get a film about Greeks.” That was the start of the avalanche for the film. Constituency. Films like this are built on constituencies.

I call the line from the conception of the story to the ultimate consumption, the Thru-Line (trademark, service mark, copyright, intellectual property). The Thru-Line is what will always return you to why you are even here anyhow. When you are pitching your film and its reasons for being to an investor, your Thru-Line is what you are asking them to partner with you on. When you are lining up actors and production personnel, you are asking them to get aboard and help you attain the vision that delivers your Thru-Line. When you are presenting your film to a festival, or to a distributor, you are asking them to get aboard and help you bring your film to the audience, achieve the fullest expression of the Thru-Line.

Why Does The Thru-Line Exist, Then?

The Thru-Line is your direct connection to your audience, why you’re even making the film. It can be sublime, sharing a meditation on the most metaphysical of concepts in a documentary or a filmed tone-poem, or it can be a ridiculously funny and bloody zombie romp, or it can be a quiet look into the emotional needs of a woman uprooted from her homeland and dropped into an alien farm town halfway around the world. And I’ve enjoyed working on all of the above.

Every Film Is A Sizing Problem Challenge – Then It’s A Marketing Problem Challenge and Opportunity

What do I mean by that? I don’t mean that marketing is at the heart of your endeavor, but I do mean that communicating the existence of your film to your natural audience is as important as making the dang film in the first place. So, thinking long and hard about who your audience is, how to describe them, why they even want to see your film, or they need to, is a crucial first step.

Unfortunately, this business (making a film) usually costs some kind of money. And often the story requires enough money that a couple of friends just can’t do it out of their wallets, even if their wallets are middle-class, or above middle-class.

So, unless you can do the whole thing on your own allowance, you will need financial partners. Knowing who your audience is, and being able to clearly articulate who they are, and why they want to see your film is part of bringing those financial partners on board. Knowing who your audience is can also help you size that audience in some reasonable fashion.

Celibate Goths may be a pretty small group, but you can look for them and their friends and try to find out how many there are, and how they communicate, and get a feeling for whether they can help support your ten million dollar movie or not. If not, then you need to either determine how to crossover, or how to trim your budget by five or ten bucks. This is “Sizing.” Now, when you do this a lot, sizing becomes easier, and you can get a feel for it, but there are no absolute “facts” out there, and you just might uncover the surprising and wonderful fact that Celibate Goths are all on one Twitter channel, and that there are forty five million of them, and they all use VOD extensively every day because of something they got in a tweet, so your job is easy, and a $10 million negative cost is easy to deal with. But the key thing in this paragraph is that “there are no facts.” Everybody in this risky business of filmmaking and delivery wants to feel secure, so they grab at “facts” and spout them repeatedly, to gain and retain comfort, and to provide it to others.

Here’s a fact:

In a 2009 New Yorker article on the new Julia Roberts and Clive Owen international spy dalliance romp in the hay, the author says that “Today, the film industry considers adult-oriented drama a small target, and one that is getting smaller. Middle-aged Americans don’t go to the movies; young adults and teenagers do, and they prefer action to talk…”

There are actually several facts stated in this small excerpt, a. what the movie industry considers a viable target audience (probably based on the “4 quadrant” theory – men, women, above age 25, below age 25) b. who goes to movies (and who doesn’t) c. and what they love in a film (and don’t love).

Let me show you a countervailing couple of facts:

  1. The audience opening weekend for Gran Torino was 45%+ 50 years old and older. The audience for The Unborn the same weekend was more than 40% under 18.
  2. Gran Torino achieved $143 million US gross, and The Unborn achieved $42 million US gross.
  3. Gran Torino had 52% highly satisfied female attendees opening weekend and The Unborn had 56% very unsatisfied female attendees opening weekend.

1, 2 and 3 are much closer to facts than the facts (a, b, c) in the quote above.

The secret is, (whisper) the audience is aging, and, frankly, the MPAA is trying to hide that, or, at least I think they are. Up until 2005, they reported age and attendance figures by slices like this:


Starting in 2006, they began reporting it like this:


Now, read below, and you might wonder, like I do, if they are trying to plaster over a crack in reality.

  • In 1990, the percent of moviegoers above the age of 30 was 37%.
  • In 2000, the percent of moviegoers above the age of 30 was 42%.
  • In 2006, the percent of moviegoers above the age of 30 was 51%.

The audience is aging, and has been since at least the mid 90’s. I have been covering it that long, sad to say, or happy to say. But these are facts.

  • In 1990, the percent of moviegoers above the age of 40 was 17%.
  • In 2000, the percent of moviegoers above the age of 40 was 24%.
  • In 2006, the percent of moviegoers above the age of 40 was 33%.

When a segment of the audience nearly doubles its hold on a marketplace (those above age 40), this is significant. But even these facts are also “facts.” When you start to analyze frequent moviegoers, you get a different, but not radically different slant on the situation. As would be anticipated, you lose a few points when looking at frequent moviegoers in the upper age groups. They have a lot more discretion, a lot more money, a lot more decision freedom, and a lot more they like to do.

And don’t even get me talking about online presence and other facts areas like that. What many people think are facts are actually just crap to talk about.

The point is, facts are closer to facts, and what is often taken as “received wisdom” like the statement from the New Yorker article is nothing but water-cooler talk, in light of real facts.

That’s why what you hear in the halls of AFM might be far from a fact, and just one piece of anecdotal information handed around ten times before it got to you, all massaged into a soft little tidbit.

Facts are actually better.

Every Film Is A Marketing Problem Challenge and Opportunity

I see every film as a marketing problem (Read: problem as task) challenge and opportunity, but that is really broken down into:

  1. An audience identification task
  2. An audience sizing task
  3. An audience hangout identification task
  4. An audience message preference identification task
    1. An audience position in the flow of information
  5. A scoping out of the cost of messaging the audience task
  6. Identification as to whether all this will support the ostensible negative cost, or investment.
  7. Go/No Go – or redesign…

Unless these things are at least reasonably and satisfactorily answered in some way, it is hard, I believe, to begin to think really clearly about what the model for your film’s life could be.

Oh and by the way, the Julia Roberts film opened with a 60% female audience, and almost 50% aged 50 and above. Both males and females were generally dissatisfied, and older audience members the most dissatisfied.

Maybe next time I will talk about finding a model for your film, a crucial step in forming your business plan.

Onward and Upward!

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Multi-Project Funds and Companies

post on October 17th, 2012
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Having just delivered the cash flow and financial projections for a $50m fund with a $6m development company residing on top, there are many issues that these kinds of companies bring to my mind. Forgive me if some of the discussion here today seems arcane or complex, but I want to try to explain some of the questions this brings up in discussions with current clients, as well as things that may be helpful to incoming clients (or to anyone who reads this).


One of the key items I always want to think about when first approaching the idea of a fund is EFFICIENCY. What do I mean by efficiency? First, I like to see if there are similarities among the films anticipated to be on the slate of projects, or similarities in approach. They could all be animations, or they could all be below $20 million, with some at $5M, some at $10m budgets, and so on. They could all be dramas or all very indie projects.

It may be that clustering projects can allow us to also cluster comparable films studying, and even cluster the projections that would drive the cash flow spreadsheet. As well, clustering can allow us to reduce the work in the business plan, in the audience analysis and description, and in other areas. This does not mean that it is bad not to have clusters, but just to illustrate that my approach is to try to find efficiency, which will be to your benefit when we are developing a plan for your work.

Clarity In Communications

Our next, most crucial element is to focus on what will bring clarity also to your team communications and to your communications with potential partners and investors. Simplification and efficiency are also aids there, but, in truth, this is a complex business and it sometimes takes a bit of time and talking to turn the complex into something that all can understand. The main thing to know is that clarity is one of our primary goals in all the work we do for you.

Development and Production Companies

Is It Necessary To Have Two Companies, One Development and One Production?

I won’t be trying to answer the legal ramifications of these issues, but more the business planning issues, and how they impact what we do for you, including the financial modeling.

In some cases, more efficiency can be achieved in planning to embed the development costs for a project right in the budget of each project, eliminating the need for a development company as a separate entity, or overarching entity. This is sometimes hard for folks to see how it works, whichever way we go. But, to simplify this decision, if the costs of development are all embedded in the projects, you are essentially saying that you don’t need cash to run operations until a film or package of films is funded. If, however, a producer needs money to be able to pursue the business of the development, from scripts, to office, to staff, to travel, etc., then it would seem to necessitate either a side letter (and I won’t explain that either, but let your lawyer explain if it works for you) or a development company would be the approach.

Some of the issues to think about for this development company that could be helpful to you:

–Will it develop films that do not go to production, get flipped (developing it and selling it off to someone else), go into turnaround (the company decides to quit pursuing it and sells it to another company), or abandoned (just drop it)?

–Will it develop films that go into co-productions?

Will it develop films that are fully funded and managed by the development fund?

–Will the development company take a management scrape on the production fund?

–How will the development company share in the proceeds of the production fund, fully, or in part?

These and other issues being thought out a little bit up front can aid in getting your company faster to market and help simplify the management of your activities.

Financial Modeling

So, the early decision tree and how you pass down through the series of decisions that need to be made can really aid in clarifying the activities of the company and the most efficient way to get to your goals of funding and doing the business of the company you want to pursue.

I find that all of the key decisions of a company wind up in the financials. This is not to say that a company is numbers, but is to say that the numbers illustrate a plan for reality and the pursuit of all of your activities. Financial folks, too, are used to looking into numbers to find out how things will work. So, an excellent business plan that talks about the activities of the company, the people, the issues and the plan to execute on them, is crucial, but the numbers will tell the story of the opportunity, and, though they are not remotely a crystal ball, they enable one to dig into the potential and see how it plays out.

The way different kinds of films will perform in the marketplace and the timing of releases in conjunction with production are totally different on an animated film compared to a low-budget indie. As well, the timing of market incomes, from domestic theatrical to television, to all of the foreign markets and everything in between, are different for each type of film. So, a cash flow is like looking at a photograph of the activities of the company, as opposed to just reading about it.

Anything we can do to create efficiency in the work we do for your company and your projects we consider to be good work, which comes out to the benefit of all of us. We can get you to market faster, with less fuss, and with a solid plan. Most of our clients are happy with that.

For anyone contemplating a company slate, I hope this is helpful.

Onward and Upward
Jeffrey Hardy

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What is a Film Business Plan?

post on October 17th, 2012
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This is a foray into the key elements of a business plan, in which the philosophy, and the nitty gritty of proper business planning will be discussed. Feel free to respond. Comments that can be helpful to others may end up in future issues. My intention is to walk through the parts of a business plan and discuss them as we go.


The first thing I want to say is what a business plan is not. At least in my mind, it is not just a document which has the magic power to make the pitch and get you money without you showing up or exposing yourself, or putting sweat and your best thoughts into the process.


I like to call your business plan your plan for business. So, what it is, is a collection and recording of the assets (scripts, people, equipment, contacts, contracts, proprietary knowledge or technology) of a proposed and/or existing company, as well as a set of educated predictions for the marketplace and how the company will make money with their product.

Are there certain conventions in a business plan, items which one generally needs to get the story across? Yes. And we will get to what those regularities are as we go along, but for now, we will work our way through the preliminaries, the keys to how you should think about your business plan.

Many filmmakers are so focused on their creative goals that they forget that they also must have a business vision which they can articulate as well as they do their creative vision. It’ll be cool, trust me, just isn’t enough. Particularly now.


First we need to ask and answer a couple of questions, and from those answers we are closer to the business mission for you.

What do you want for yourself?

  • A new car?
  • New shoes for the baby?
  • The chance to make a second, third and fourth film
  • A house?
  • Access to a broad audience
  • Total creative freedom?
  • To work with friends in a collaborative environment?
  • All the money in the world?
  • Your own production facility?

To be an honestly successful blend of the creative and business person all in one..?


Honest answers to this question is the first step in creating a business plan. If a plan does not fit you, and you are the chief executive of the company, how can you pursue it to its logical conclusion? Any viable investor will want you to be motivated and fulfilled. It should be in fulfilling you that you fulfill an investor’s goals too.

As well, I would say, that if you cannot answer this question honestly, and in a way that takes into account the rest of the world, you may gain the whole world, but lose yourself along the way, and have no way to actually enjoy it. Maybe an outmoded concept to some, but I believe it is truly so.


What do you think your potential investors want?

  • Some want money for things like you want.
  • Some want money for things you don’t care about.
  • Some have money and want to have fun at something new they couldn’t do for themselves with all the money in the world.
  • Some want to change the world a little with the money they have.
  • None want to do anything stupid.

Your business plan is built internally, upon facts about the outside world.

Your business plan incorporates your vision (mission) for yourself.

Your business plan encourages the visions (missions) of the right potential investors.

Your business plan should be a road map to effect both sets of goals.

So, the first thing to do for a business plan is define your vision, your mission, your goals.


This is not an actual mission statement, but it incorporates the concepts that bring a mission statement to life:

To make the best damn film I and my team members can make. To make people laugh at the characters in the film, and thereby learn to laugh at themselves a little (hopefully). To have fun with a good team of people around me who know how to make high quality films on a reasonable budget that is not oversized for the market. Have that film sell enough tickets that it makes our investors (who we also think of as team members) money, that it makes my other team members money, and that it makes me money This is an actual mission statement:

Vision Pictures, Inc. a Florida corporation, has fully developed, and intends to finance, produce, and distribute a romantic motion picture tentatively entitled Vision, and thereby to manage the rights to Vision so that it is seen by mass market audiences on a global basis, and subsequently returns profits to the film’s investors and to all of its profit participants. This is an actual artistic mission statement:

The artistic mission of the film Vision is to produce an original and audience-pleasing entertainment which can inspire viewers from all backgrounds by showing them that there is more to be gained from life by giving to others than there is in merely taking from them.

You can have both a business mission and an artistic mission. A good business mission statement need not be complex, but it will signal that you intend to keep promises to achieve the financial goals of the enterprise as well as your artistic goals.

I have worked on films that also have a proselytizing mission. There is room within the world of business planning to incorporate any vision and mission that there is. If, however, your mission is all about yourself and your needs and hopes and fears and dreams, then be prepared for people you talk with about it to tune you out and tune your business plan out.


It is a document which describes your vision and how you are going to reach that vision, and it is a document which describes how you are going to enable the visions of others through effectively reaching your own.

Over time, in subsequent newsletters we will break down the elements of the business plan, and discuss how each is arrived at, how it works, and the decisions inherent within it. Here is an outline of the sections we will cover.


The outline below lists the contents of an average business plan which we find are important to investors and partner companies. Each film company and project bring a different set of talents, strengths and weaknesses to the table, and thus each plan has to have an individual set of emphases. A more detailed outline of a business plan is available on our web site, under Business Planning.

  1. Mission Statement For Your Movie
  2. Executive Summary
  3. Motion Picture Market Statistics Overview
  4. Domestic Markets
  5. The Birth Of An Independent Film
  7. Synopsis Of Your Movie
  8. The Process Of An Independent Film: From
  9. Conception Through Post-production
  10. Gaining Distribution For Your Movie
  11. Festival Strategy (if any)
  13. Domestic Primary Markets
  14. Foreign Markets
  16. Movie Audience Demographics
  17. Analysis Of Target And Any Crossover Or Secondary
  18. Audiences


  • Biographies and Resumes
  • Historical Studies of Comparable Films
  • Projections
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What Is The Size Of The Indie Box Office?

post on August 2nd, 2011
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Is It Well Over 30% As Some Want To Say?

I know I have been away from posting for quite some time. The last year and a half have been extremely busy at FilmProfit. And this spring and summer, I call the Indie Spring! I hope it means well for all of you, and all of your projects. I hope to be posting more here and more often. Thanks for coming by to read this!

I have lately been seeing reports from various folks who comment on the indie film sector, who have wanted to peg the indie portion of the box office at or over 30% year over year for nearly the last ten years. In one case, I saw a chart under a headline that touted indie strength, and the chart showed every year the indie portion of box office in North America at over thirty, with some coming in at closer to 40%.

Now, for the life of me, I cannot find any numbers that would support this. Those of you who know me know I don’t like to just talk off the top of my head, and even when I “gut-feel” something like this, I like to stop and check it out, not just blurt out “wait a dang minute, here…”

So, wait a dang minute here! I went back and did some investigation, to see how it could be that these high numbers were being quoted. I kind of started in the middle, in 2005. Box office total that year for North America, was $8.82 billion, of which, some $40 million was 3D (likely mostly IMAX-style offerings). The total of films released that year was 549, of which 194 were MPAA member releases. Those MPAA member releases brought in an average of $37.3m per film [unless somebody at the MPAA is just flat out lying, which I highly doubt], or $7.236 billion, of the total $8.78 billion (non-3D) in box office. This equated to an MPAA portion of approximately 83% of the (non-3D) box office. So, if the studio films captured 83% of the box office, then how do we get a balance of 30% available to independent films? And, in the other chart touting 30+%, MPAA was cited as a source, so I am comparing apples to apples here.

In 2004, just to go a little bit further, $9.54 billion in box office (according to 2005 MPAA; while 2008 MPAA says $9.2), with 198 titles belonging to the MPAA companies, each averaging some $34.6 million in box office, for an MPAA total of $6,850,800,000, or 72% (approx.) of the box office. Now, this was the year in which one independent film, The Passion of the Christ, accounted for $370 million in ticket sales. So, of the $2.69 billion that could be attributed to independent films, 13% or so, went to one independent film, leaving $2.32 billion for the remaining 321 films. If we exclude Passion of the Christ from the calculation, independent films only account for about 24% of box office for 2004, and even if we include Passion of the Christ in the calculation, independent films still only account for about 28% of box office for 2004. This is as close as I have seen it get to a 30% of box office attributable to indie films.

Now, it is possible to find interesting ways to allocate indie films, and that could result in an argument going round and round about this, but the way I have done it here, and verifiable, is very arguably the natural way.

In relation to the figures claimed by some to be in the 30’s of percent, and to mine, which calculate out to the mid to upper 20’s of percent, I also came across an article from Time Magazine. In November of 2009, Erin Davies said: “From 2001 to 2005 independent film made up around 25% of the total domestic-box-office gross. That percentage has dropped to 18% for [the] year-to-date [in Nov. of] 2009.” I can’t verify this statement by Davies, but it accords much more readily with all of the other evidence around the indie film business, discussion among distributors, and more. So, it would not surprise me at all.

But what is my big point here, after all this calculating, and researching and noodling? The independent film business will not solidify its reputation with investors by feeding its cohorts and investors information that is not based on the real marketplace. A real business plan has to be based on real information, and a plan to make that information work for you. I would never counsel a client to make their film for a budget that does not appear to work with the models available, nor would I try to build a business plan based on a marketplace size that is not there. Using proper models, properly sized markets, and a plan that fits them, is the best path to success.

I would love to know what others think about this post…


Onward and Upward

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Devaluing The Movie Proposition

post on December 9th, 2009
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The Commoditization of Movies

There are two ways to price and sell products at market:

  • One is the MARGIN method.
    • The Margin method is usually based on a scarcity; either of product (even if artificial, like diamonds) or of consumers. The margin method is how Apple has typically pursued its business. Make the product at as high a level as you can, understand that your constituency will be a smaller and more loyal body of fans, and make money on the wide “margin” between costs of production and the price paid by consumers.
  • The other is the VOLUME method.
    • The Volume method, then, is usually based on a high availability, essentially, of both product and desiring consumers. When Blu-Ray players were introduced at $500 to $1,000, they were scarce, and only wealthy early-adopters could or would pay that much. But there was more margin in each sale. Now it is possible to acquire a Blu-Ray player for as low as $79.95, moving it into the reach of most. Many technology products enter the market this way, following a path through early-adopters to the wide consumption landscape. Under this volume method, the product is priced at about as low as it can get, intending to saturate the market at a level that is always aiming at “everybody.”

Until the advent of DVDs, motion pictures for home viewing used both of these methods. If a movie had a high potential to sell a lot of units (if it was for “everyone,” like E.T.), then the VHS cassette would be priced at something under $24.95, and often as low as $14.95, maybe after a MacDonald’s or Pepsi partner rebate or the like This pricing was called SELL-THROUGH (or Sell-Thru). Other titles would be priced from about $59.95 to as high as $112.95, with the average pricing for quality titles around $100 around the time that DVD was introduced. These titles were priced for RENTAL, and for the collector who had to have that title and was willing to pay up to own it.

So, some films were treated as Margin titles (Rental), and some as volume titles (Sell-Thru), according to the necessary and reasonable analysis of the size of the market for the movie itself. This pricing methodology brought a broad range of quality films of all types within the consumption grasp of a wide cross-section of the film-loving public. Sell-Thru blockbuster status was highly desirable, but everyone knew that every film was not a blockbuster, so many films used the margin method to maintain profitability.


Now, when DVDs entered the marketplace, a decision was made that DVDs would sell for a price that would be focused on Sell-Thru, and a “most-favored nations” pricing deal was struck which said that all parties would get the same DVD for the same wholesale price. Now, these decisions caused a boom in DVD consumption, and a growth curve for the business that solidified the lead home entertainment already had won over box office and ancillary markets. This growth curve was accelerated by big box stores, the WalMarts and Costcos of the world, using DVDs as doorbusters, as loss leaders to get folks inside their cavernous confines so they could sell them something else. These tactics, driven as they were by something other than a pure love for movies, and other than a pure desire to make movies more profitable overall, exerted further downward pressure on the retail prices for DVDs, further lowering consumers’ expectations of what a movie should sell for.

Now, a little more than ten years after, and in the midst of a recession, some of the chickens of these “blockbuster-oriented” decisions are coming home to roost. Independent movies, made for smaller, more focused, and discerning audiences, whether consumed in theaters or on DVD, on television or VOD, are not a commodity product that can be priced in the same exact way as a blockbuster entertainment. Allowing the WalMarting and RedBoxing of Independent movies that have been, essentially, hand-made for these niche audiences have the strong potential to kill them slowly (or maybe quickly). The WalMartization of DVD was a big contributor in the Dreamworks near-total demise, when shipping too many copies of a Shrek DVD came home to roost when WalMart and others shipped back millions of unsold copies.

This across the board pricing scheme, along with WalMart and RedBox are devaluing the movie proposition overall, and are creating expectations in the mind of the consumer that all products are alike, when they are not all alike. Great foreign films, great independent American films should be marketed and sold like the fine wine and artisan foods they are. Consumers of these films are hungry for the emotional nourishment, the mental nourishment, the soul nourishment that cannot be found in blockbuster films that have had the corners and spikes of individuality rounded off in committee meetings. Just as these consumers pay a little bit more for organic comestibles that they believe are crucial to their health and welfare, they should be willing to pay a little bit more for these other elements of their emotional and intellectual well-being.

When I look at the landscape, I see where studios have snatched up independent distributors, and now are in the process of choking off whatever remaining life most of them have. It could be described as necessitated by, caused by, or the result of the recession, but, if they had wanted to take these nuisance smaller players off the street, they could not have found a more effective way. Now, I don’t for a minute think that this was the idea ten or fifteen years ago, nor do I think it’s the idea now, but it could not have worked out more like this if they had engineered it. Independent films, their distributors and their consumers have entered a complex vortex.

I know this is a delicate, and even a difficult proposition to contemplate. I am not even sure how it could be approached, getting distributors of indie product to re-introduce highly differentiated pricing commensurate with the product and commensurate with its market. But I know one place that can start to deal with this. Having written about Producer Controlled Releases lately, I am now saying that these releases have to be priced and price-maintained such that the margins are sufficient for each Producer-Controlled Release, and sufficient time and effort need to be expended to maintain the value of the proposition between producers and their consumers, between distributors and their consumers, such that consumers are educated to an understanding that they are buying artisan product, unique product, exceptional product, and just as they willingly plunk down for their iPhone, their audiophile system, their artisanal bread, they need to be ready to pay for the unique experience of viewing and owning one of these films.

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